Abandoned Mission

During the Great Depression, the federal government incentivized credit unions to provide consumer-focused financial services to people of modest means by granting them a tax exemption. Given the severity of that economic crisis, the policy was crafted to help at-risk communities weather difficult times by expanding access to credit. However, the industry has evolved over the last 100 years calling into question their preferential tax and regulatory treatment. 

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Expert Views

Erica York, Tax Foundation
“Given the change in the financial sector over the last several decades, it would be useful for lawmakers to reexamine the extent to which credit unions currently fulfill their original purpose. If they have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities.” 
— Tax Foundation, 2018
Karen Shaw Petrou, Federal Financial Analytics, Inc.
“About half of all credit unions are allowed to use ‘secondary’ capital instruments generally barred for banks. Credit unions that issue this capital fail at a rate that is 362 percent greater than conservative institutions. Proposals to expand the use of these instruments thus may increase overall solvency risk in the credit-union sector, exposing members and the broader economy to risk.” 
— Federal Financial Analytics, 2019
Aaron Klein, The Brookings Institute
“But if your word is your bond, does everyone who speaks share a common bond? In that case, the concept of a common bond is meaningless. That is the direction that the nation’s credit union movement, including its federal regulator, appears to be moving — and that’s something the public and policymakers need to stop and think about.” 
— The Brookings Institution, 2017
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Large Credit Unions Have Abandoned Their Mission

Recent News and Insights


America’s $2.2 trillion credit union industry, which enjoys a free federal tax ride and minimal oversight, is busy this fall in a coordinated lobbying blitz in Washington and across state capitals to further dilute its already dubious membership requirements.


This week, the U.S. House of Representatives Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs will hold oversight hearings with prudential regulators. In addition to other financial services regulators, National Credit Union Administration Chairman Todd Harper will testify.


American taxpayers have once again completed their civic duty of meeting the IRS filing deadline, but for a $2.17 trillion portion of our economy – the industry comprising America’s 4,760 credit unions – April 18 was just another Tuesday.


In December 2022, over 200 credit union lobbyists descended on Charleston, South Carolina, to plot their advocacy strategy for the year ahead. Participants made clear that the credit union industry plans to continue paying lip service to serving low- and moderate-income (LMI) communities, while directing its efforts toward expanding into new affluent markets.


As the regulatory regime for credit unions becomes more relaxed, complex credit unions have become indistinguishable from community banks. Their ability to raise investor capital with 30-year horizons facilitates growth that goes well beyond credit unions’ original purpose.  


To borrow from the great line purportedly uttered by late Sen. Everett Dirksen about spending in Washington – “a billion here, a billion there, and pretty soon you’re talking about real money” – credit unions are taking huge advantage of their regulator’s relaxed position on the highly profitable not-for-profits by raising hundreds of millions of dollars a quarter from hedge funds and other for-profit investors in the form of subordinated debt.

See the impact on taxes in your state.

Tell Congress it’s time to reform credit unions.